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Author: Nick Lawlor QFA CFP® SIA

Director, New Beginning Financial.
Nick Lawlor is one of less than 400 Certified Financial Planners operating in Ireland today and is the Managing Director of New Beginning Financial Services Ltd. Nick heads up our corporate services offering Smart Money and is the primary point of contact for our corporate clients.
Nick has spent his entire career advising clients on their personal financial goals and objectives and has an entirely client centric approach to his financial planning philosophy.

Ireland, being the country that it is, has many tax rules and laws that we primarily mightn’t like but secondly, are totally unaware of. I’ve been dealing with one such problem quite recently relating to how the revenue views the proceeds of a life insurance policy to a couple who are co-habiting but are unmarried.

In the census of 2015 we discovered there are over 140,000 co-habiting couples living in Ireland. Of those approx. 60% have children. The likelihood is that although these people are not married, they will have or will want to have financial protections in place such as life cover and mortgage protection, to ensure financial security for their family in the event of their untimely death. Makes absolute sense but the problem is, how will the revenue view such a pay-out if the worst does come to pass?

Most will believe they are leaving their partner and kids in a secure financial position but the reality can be very different. If you are in this situation you could be leaving your family with a significant inheritance tax bill without knowing it.

Allow me to explain. A co-habiting couple have a joint life insurance policy for €300k paid from one partner’s bank account. That partner dies so there is a €300k pay-out to the remaining partner as the remaining policy owner. As the couple were not married, the inheritance tax threshold is only €16,250 meaning the balance of €283,750 would be liable to tax at 33%. An unwelcome tax bill of €93,637 lands on the remaining partner’s doorstep, often with no means to pay it.

If the premiums were paid from a joint account they would still be liable for inheritance tax on half the proceeds of the life policy. Furthermore if the policy was set up on a single life basis and there is no will in place the proceeds would actually be paid to the next of kin and not to the remaining partner at all!

For married couples, however, any inheritance is deemed to be tax free so the issue only exist for cohabiting unmarried couple’s.

This unwanted tax bill is however entirely avoidable.

There is a method of setting up your life insurance in such a way that no tax liability is payable regardless of whether you are married or not. Each person simply takes out life insurance on the other i.e. on a “life of another” basis and pays the premium from their own bank account and income, the benefit would be paid out to the remaining partner of the policy without any inheritance tax owing saving most clients in this situation an absolute fortune.

If you are a co-habiting, unmarried couple it is really important to get in touch and have it reviewed as a simple change in the way your policy is set up could make all the difference to your partner and kids if the event you are trying to protect against actually does happen.

As always if you fall into this category please don’t just leave sleeping dogs lie, please get in touch and I’ll be happy to review your set up.

You’ll get me on nick.lawlor@newbeginning.ie or give us a call on 01 531 0571.

Annuities are often undesirable beings that live in the corner of the retirement room.

They were once the alpha male, strutting around, dominating the retirement landscape and providing strong and consistent returns for its investors for life. They often provided a return of 8% – 10% per annum so were attractive options for clients.

This was before the landscape changed back in 1999 and you were no longer obliged to buy an annuity with your retirement savings. Combine that with a reduction in annuity rates since then, has meant that an annuity is no longer a popular choice for clients.

An annuity is a regular income paid for life. You buy it with your retirement savings and it will pay you (and your spouse in some cases) an income for the rest of your days. A rate of say 4% would return a client €4k for every €100k spent. The real problem with annuities is that the €100k is gone. No money back if a client dies after 5 years when only say €20k has been returned. A very poor return I think most will agree! The flip side of this is that should a client live until they are 120 years old the annuity will still be paying them an income and in this instance, it becomes a smart choice.

Some retirement contracts have guaranteed annuity rates built into them and if this is the case then you should sit up and take notice. These rates are typically far better than are available today.

Furthermore, annuities do sometimes serve a good purpose. There is a rule in Ireland that says that once you have taken your lump sum you must have a guaranteed income for life of at least €12,700 or you must invest €63,500 into an Approved Minimum Retirement Fund (AMRF). I’ll go into more details on AMRF another day.

Considering the state old age pension is now €12,391 per annum, you can purchase an annuity for €309 per annum costing about €7725 of your retirement savings. This will mean that you have satisfied the above requirement and can have access to the balance of your retirement savings if you wish.

Also in bankruptcy, there is an allowable regular income for life. If a client invests into an annuity with their retirement fund it can often mean a client gets some value for their retirement savings. Whereas if it was left in another form, the same savings could be lost to creditors.

Annuities come in various shapes and sizes too. For example, there are some single life annuities which will only pay while one policy owner lives, compared to a joint life annuity which will continue to pay some or all the benefit to the first policy owners spouse.

Annuities can increase their payment to the policyholder over time too or they can stay level throughout the term. Annuities can have guaranteed period which mean that even if the client dies in that period the annuity will continue to pay out until the end of the guaranteed period.

There is even now something called and enhanced annuity. This is an annuity which will give you a better rate if you have listed medical condition or if you’re a smoker. I guess they feel the chances of you being around for a long time are less so they will pay you out more every year!

Of course, different providers have different rates so always worth shopping around too.

All shapes and sizes as I said. And yes, lots of jargon too but it wouldn’t be the pensions industry if there wasn’t a bit of jargon.

As always if you have niggling doubts in your head or need more information on any of this please just get in touch with me directly on nick.lawlor@newbeginning.ie or call me on 01 531 0571.

“If I was a Financial Adviser I would… know my retirement options BEFORE retiring”

Decisions around retirement.

So, you are nearly there. Finally.

You are about to arrive at retirement when your days will be filled doing things you really want to do. Ah it sounds like bliss. Travel, golf, time with family, the list goes on.

Just the small matter of figuring out how much money you will have to eat, travel, pay bills, and tick items one by one off your bucket list. And then to do all this on repeat for lots of years ahead.

Most of us will have some form of pension in place. It might be small or indeed it might be substantial, but when it comes to drawing down your pension you will be presented with options. Lots of them.

Once upon a time pensions were simple things… ok simpler things. You got a lump sum tax free and you then got a regular income for the rest of your days, no matter how long that happened to be.

Now there are lots of choices and options and plenty of jargon to go with it.

Tax free lump sums amounts can vary in size but are limited. You can have multiple pensions with a variety of employers and providers. You will be faced with choices between Trivial Pensions, annuities, Approved Minimum Retirement Fund’s or simply an Approved Retirement Fund. You will also be faced with a variety of providers, charges and investment strategies. Then there is the old age state pension too. When will that start and how much will that be?

You know these decisions are important and but you also know they are complex. You will receive a benefit decision form from your pension provider. This will list the various options available and ask you to decide.

Each option has implications and some of these options, like an annuity for example is not reversible. So, my advice is to please beware, you must make an informed decision.

Normally at this point I would start to explain each of these options but the reality is that recommending an ARF to one client may be the best advice possible for that client but an annuity for another may absolutely be the way to go.

Each person’s situation is very different and really, it’s the requirements and needs of each client individually that drives the decision about what they should do. As a result, there is no point explaining the ins and outs of each product, we must start this process by looking at the client, not the pension fund. It’s the client’s circumstances that drives the decision around how your pension should be drawndown, not anything else.

Pensions are limiting and worthwhile all in the same breath. Too often we have come across clients who made decisions around retirement that did not suit their needs and could not be undone.

Please, if this is you, and you have retirement on the horizon, just get in touch because understanding pension lingo is like trying to understand a different language. And when you are making decisions regarding your future it’s probably better to use an interpreter than take a punt on it!

As always, if you would like to run anything past us, you can contact me directly on nick.lawlor@newbeginning.ie or on 01 531 0571.

Once upon a time Irish people looked for a job for life. No longer! The average number of job changes in a career today is 8.

Let’s let play this out from a pension and a financial planning perspective for a moment.

Most of us leave our pensions behind us when we leave employment and move onto pastures new. If this happens once, twice, or eight times during your career you really should give some consideration to how your pension money is been dealt with while you are working in your new job.

Company pension schemes are managed by scheme trustees. The trustees are individuals or trustee companies who make decisions on behalf of the pension scheme members. They make decisions about investments and charges, retirement ages and providers. Lots of things that affect the value of your pension fund. If you leave service you are presented with choices however. One of those choices is to move your accumulated fund to a Personal Retirement Bond, sometimes known as a Buy-Out Bond and I like this option.

Retirement Bonds are provided by insurance companies and pension providers and they are treated the same as standard pensions, meaning that the fund grows tax-free and you have the same options at retirement that you’d get through your company pension scheme. All the same rules apply.

The difference is that the Retirement Bond is held in your own name and you’re fully in control of all of the various factors that determine your pension fund value rather than the company pension trustees. That means that you can make decisions such as what funds to invest in, the charges, the provider and the investment strategy. The bond is fully portable so you can transfer it between providers too if you wish too. So lots of good things, while eradicated the bad or the uncontrollable.

Of course not many of you wake up every day and think, I’d love to get more control of my pension fund granted, and hence I have a job.

Being honest I don’t wake up every day and think about it either, until I get to work of course. But we do know what we are doing and we know how to ensure that each of our clients has the control of their pension assets that they should really have.

And there is one more really important point. The pension’s landscape in Ireland is changing and there is a significant move to get rid of Buy-Out Bonds altogether and replace them with PRSA’s. Now if I got into the detail of this move here you’d all be asleep by the time you got half way through so I’ll summarise. This is a backward step in my opinion for various reasons. The change is however likely to happen and will probably happen in 2018.

So there is some urgency here.

If you have left a company or indeed left several companies please get in touch with us. I think it is important we consider your pension situation and help you to get full control of it again.

Waking up just once and thinking about your pension situation, just once, could make a significant difference to your retirement. As Nike say, just do it!

As always get in touch with me directly on nick.lawlor@newbeginning.ie or call Kathy on 01 531 0571 to arrange a chat.
Until then,
Nick

Ok that’s a bad idea, but in the world of your finances mixing is a good thing.

The most effective methods of making money turn into more money is put it in lots of baskets, not just one. But you heard that before, probably agreed with these sentiments and then moved on with your day. But what does “never put all your eggs in one basket” really mean when it comes to your savings.

Let me explain.

There are 4 main types of money.
1. Cash – the one we all know so well. Bank accounts, credit union etc.
2. Property – bricks and mortar, it can’t go wrong!
3. Bonds – Governments and large companies want to raise money so they issue bonds. Investors buy these bonds and the government in turn will pay them back their money, plus an interest rate yearly.
4. Shares – Companies around the world issue shares on stock markets and their prices tend to fluctuate a lot based on various economic and company factors

Let’s think of the 4 above as your friends or colleagues, they each work in their own very special way:

• Cash is very laid back. Lazy almost. It does very little except sitting in the corner, waiting, earning very, very little. We all know the type.
• Property is your normally reliable, steady Eddie friend. It has an eye for an area it likes. Property will sometimes let you down and when it does it lets you down badly but it’s usually not entirely its own fault! It’s quite inflexible but normally will do what you want it to do if you choose the right one in the right place at the right time!
• Bonds are your rock. They will continue to pay you back long after you invested in them at the agreed rate. Beware though. You made a long term commitment so you have to stick with it if you want all that you gave them back!
• Shares are your wild, excitable, crazy socialite companions when young and enthusiastic. They can often turn into real leaders in time. They are full of ideas, sometimes crazy, sometimes terrible and sometimes brilliant. Stick with these guys for the long term and if you know enough of them the good ones will carry the airy fairy ones along for the ride.

These personality types all react to things in a different way. Often assets react in opposites so when one asset class goes up, another can tend to go down. Knowing this in advance means that we can often protect clients against the big falls that people who invest in the “one basket” approach suffer.

Like any decision in life, how you invest is entirely down to you. And yes, investment can fall as well as rise and you know that the past is no guarantee as to what the future holds but my genuine and honest belief is that there is some good in all of the above.

A broad mix of all of the above allows investors to control their risk while still earning a return. A return that is very unlikely to be earned if you sit in the corner and be lazy, uninterested and withdrawn.

I will never suggest a client uses their emergency savings like this but I will probably suggest that your pension is invested broadly. Your medium and long term money should never sit in the corner lonely!

As always, if you would like me to review your situation I’ll be happy to help. Just get in touch directly on nick.lawlor@newbeginning.ie or call Kathy to arrange a call on 01 5310571.

It’s funny, I have learned over the years that when it comes to fear, of anything, it tends to come from the unknown.

We naturally tend to hold back from most decisions until we get a good grasp of them. If we don’t fully understand something we tend to fear it. We step back and digest. Most of us rarely just take a punt, especially when our hard earned cash is involved.

So let’s think about this for a second in terms of your financial goals and whether you should consider risk.

Often we stick with what we know, hence there is €116 billion on deposit in the country today with the various banks and credits union. Up from €86 billion in 2008 pre-recession. We naturally back away from things we don’t understand and in a time of market uncertainly there tends to be a flight to safety and the high street bank or credit union is familiar, local and crucially we understand how they work. They give interest, very little, charge fees and hold your money for you. Safe.

Compare that with a “risky” fund. In 2008 €100 would have lost about €40 euro of its value by the end of 2009. That same €100 to day would be worth €175 if it stayed in that risky fund over a 9 year period including one of the worst recessions in living memory. The cash in the credit union would be worth less than €110 today.

Now here is the key point.

Understanding markets and risk and movements up and down doesn’t make you a risky investor, but it goes a long way to helping you assess if you are a risky investor.

If I was to return my mind to my pre-financial adviser days I tended to blindly go down the middle. Most of us will. When offered an option of high, low or middle, 80% of us will choose middle. But now that I understand the various investments, markets, bonds, shares etc I have changed my view.

My attitude of how much risk I am prepared to take changes dramatically based on what the money I am considering investing is for.
If I am putting €200 into my pension which I won’t access for 20 years, top of the risk scale for me please! I now don’t care if that €200 euro loses money this month or next. I now know that the best chance I have of getting the highest value in 20 years times for my money is to take lots of calculated risk. It’s the value in 20 years that matters the most, not in 6 months. It’s now a calculated risk, not a crazy risk.

Conversely if I am putting money aside for next year or for any unplanned emergencies, I won’t put it in a risky fund, I will put it in a the local credit union. It’s safe and I need it, maybe tomorrow, so I am not prepared to see its value fall, so bottom of the scale for me on this one.

I think we have to think about what the money we are saving is for. When are we likely to need or want it and give yourself the best chance of having the highest value possible at that point. It is almost impossible to fully understand every working part of a risky fund, but that itself is not a reason to shy away from it. Most of us don’t understand how car engines work fully, but we drive the car that suits us best for the journey ahead. Investing is similar.

At New Beginning Financial Services our mantra is to try to educate our clients on risk as much as possible and try to match our clients to suitable investment types. As such we will always ensure our clients fully understand that taking risk involves ups and down in the short term to attempt to deliver in the long term.

As always, if you would like us to review your existing or future investment set up to ensure its doing what you want it to do please just get in touch and I will be happy to chat through it with you.

You’ll get me at nick.lawlor@newbeginning.ie or just call Kathy on 01 531 0571 and we will take it from there.

If I was a financial adviser I would make absolutely sure my income was protected!

Now folks, there are lots of types of insurance out there. We hear the ads every single day. Life insurance this, serious illness cover that.

Stop for a second and think about what you are prepared to insure.

Insurance is a simple thing really. You should, within affordable limits, pay a premium to cover an event that, should it actually happen, you could not afford to pay for yourself with savings.

Your family couldn’t pay off the mortgage if you died and your income would be gone so they couldn’t pay it back monthly themselves either. Hence mortgage protection makes absolute sense.

It makes sense to have a tax free pot of cash in the event of you being diagnosed with a serious illness. It just does. Trying to deal with a serious illness is hard enough. Don’t pile financial stress on top of that situation. Worth a few bob every month for not having to deal with that stress too.

On the flip side I am not a believer in Payment Protection. I don’t think it is worth it. It promises to replace a payment you are making monthly, like a mortgage payment often for maximum period, often 12 months. Not for me thanks.

I recently lost my iPhone 1 month into a 2 year contract. No insurance. Because you are simply paying for your iPhone through your contract for the full two years I will admit to being a recent gadget insurance convert. Buying a new phone is an expensive business. So €7.99 a month it is so I don’t have to face that again.

And this brings me to my main point. I am financial adviser. I have witnessed so many variations on the ways clients manage their finances. In essence it all boils down to a very simple formula. Money in, expenses out, savings if any remain, spend the rest, get paid again.

The one piece of this that binds the whole thing together is your ability to “get paid again”.

Please consider insuring this! It’s imperative you get paid for the long term. Single or married. Kids or no kids. You or you and your family are absolutely reliant on your ability to bring home the bacon.

I am not sure why this insurance type is not utilised more in Ireland but its not. Perhaps it’s not advertised as much but less than 15% of the population currently know that, should they get injured or ill, that they will have income to pay their bills for the rest of their career. Compare that with over 50% having some form of life insurance. A stark difference.
It’s a very straightforward and often inexpensive insurance. It simply replaces your income.

It qualifies for tax relief and pays an income for as long as you are out so as far as insurance types go this ticks most of the boxes.

It naturally comes in various shapes and sizes and that is our job to build the right plan around you, your lifestyle and your affordability but it is an absolute must!

So to bring this back to the title of the blog…Ask yourself if you were a financial adviser, would you advise your clients to guarantee their incomes, and then take your own advice.

As always we are happy to help! Just comment on Facebook to ask any questions, get in touch directly with me on nick.lawlor@newbeginning.ie or call Kathy on 01 5310571 and we can arrange a call.

In Canada 68% of people have their own financial advisers. It’s just what they do. They have a qualified expert that guides them on the various protection, savings, investment and pension needs they encounter. They make informed decisions. They pay for it and it pays them back 10 fold. They end up with better protection in the event of illness or worse, with more short term provisions in the event of an emergency, longer term savings for their children’s education and significantly more retirement savings than we seem to be able to muster as a nation here at home.

83% of the people who use a financial adviser regularly consider themselves better off for having done so.

So where do I, as a biased financial planning professional, feel that I, or my kind, can help people. So I thought I’d try to summarise the outcomes our clients achieve having used our services.

On our watch, our clients will have the right amount of the right type of insurance with the best provider at the cheapest premium possible. Tax relief will be utilised if available.

Our clients will aim to have structured savings, addressing their emergency needs in the short term, their future education costs if they kids and longer term savings and investments which aim to earn better then deposit rates of return.

Our clients will know how to save tax.

Our clients will know what the tax benefits are to saving for retirement. They will know how to maximise their tax free cash at retirement. They will be invested in funds they understand. These funds will match their attitude to risk and be monitored for them. They will know how they are being charged for their funds.

Our clients will understand the value in inheritance planning.

Our clients will simply be better off.

The financial planning ethos in Ireland is very reactive and I think everyone should take more control than that. Dealing with something when it comes up is simply too late. It’s probably a little late to start saving for retirement at 60. There is no point trying to take out insurance after you get sick. There is no point starting an emergency fund when the emergency happens. You don’t buy into a market at the top.

Be proactive, not reactive. I know I am biased but don’t wait around, engage a financial adviser you like, that is well qualified and most importantly not tied to an individual product provider.

As always if you have any thoughts, comments, questions or if you want to get in touch you can always get me on nick.lawlor@newbeginning.ie or in Dublin on 01 524 0000.

I can’t walk past a deal. I walk into my local shop and whatever they happen to have on offer that particular week always ends up in my basket. Whether it’s choosing a holiday, a car purchase, cans of 7up in the shop or your TV package. All of us are typically always on the look-out for a bargain. And if that bargain presents itself, it is often hard to resist.

This characteristic has carried itself into my professional life. Daily we look for better deals for our clients and we simply love finding solutions for them and their families that will improve their lot.

Continuing on our theme of life insurance as it is something that most of us have I think it’s important to highlight a few important points. Last week I concentrated on the varying benefits on offer. This week I am going to focus on price.

Life insurance is underwritten at the beginning of the policy term. It does not have an annual renewal notice like car or home insurance does so it is often just let run on and on. Without an annual reminder to hunt around for better deal it simply gets forgotten about.
A couple of things have changed regarding how the price of life insurance is calculated.

1. Firstly, and very importantly we are now living longer thanks to medical advancements which means that taking out a life insurance policy now compared to even 5 years ago is cheaper. Less people die young.
2. Secondly, there is a variety of providers operating in Ireland and considering that life insurance is a requirement in most households, they have become very competitive with each other. That means that in the last 5 years the price of life insurance in Ireland has been driven down significantly. Providers constantly offer discounts which last the full term of the policy. It often leads to decades of savings for a little bit of work now. Again, if you haven’t looked at your life insurance in the last 5 years, it’s likely that you are paying over the odds for your policy.
3. Thirdly, the EU wide gender directive which was introduced in 2012 outlawed discriminatory pricing in favour of females meaning that male prices have been significantly reduced since.
4. Finally, if you have stopped smoking or your health has improved at all since you took out your life insurance significant savings could be made.

These 4 reasons alone mean that it’s simply crazy to sit on your hands and not, at least, check to see if you can do better. Especially seeing as these policies can often run for 20 or 30 years so even a small saving over time really adds up. And regardless of how small a saving is, it is still better in your pocket. Always bear in mind too that switching your life insurance policy has no bearing on the mortgage itself and can be easily switched.

A recent Caledonian Life survey showed that 57% of home owners would switch their policy for a saving of €5 per month. In fact life cover today for a male compared to 10 years ago is up to 49% cheaper and for a female up to 27% cheaper depending on the policy type. Some are more expensive of course, but it’s certainly worth checking. So how do you check? Well, as an independent financial broker, we can check the various providers for you, or you can shop around the various product providers yourself.

As always we are happy to help if we can, just send me an email to nick.lawlor@newbeginning.ie and let me know your situation, I’ll come back to you as soon as I can. Otherwise just give me a call on 01 -5240000 and we can chat through it with you.

For years the only type of life insurance that was sold in this country was called whole of life cover. Sounds simple. Pay a premium, get covered for the whole of your life. Where do I sign? Like all things in life there is unfortunately a catch.

Broadly speaking there are 2 types of life insurance plans. Guaranteed and reviewable.

About Whole of Life Plans

Whole of life plans are reviewable. That means that as you get older, the premium increases to reflect the fact that you are older now and more likely to kick the proverbial bucket. But I am not talking about simple inflation protected 5%’s. Often a person will have a doubling of the premium every couple of years as they enter their 50’s and get older.

Your choices are simple. Pay significantly more money every month for the same cover or have your cover reduced dramatically for the same premium. Sure, you can have the life insurance for the whole of your life, if you are prepared to pay through the nose for it.

The reality here is that life insurance companies are laughing the whole way to the bank. They know that in a significant number of cases, clients whose kids have grown up and whose mortgage is repaid will simply cancel their policy when the massive premium hike arrives through the door. Often the life company has received 20 or 30 years of premiums and will never have to pay out as the customer now feels the premium is unaffordable and now unnecessary.

Often these policies have savings built into the premium too, just to really muddy the waters. But again there is a catch. When the premiums for the life insurance increase, the terms and conditions of the policy allow for the excess premium to be drawn from the savings you have accumulated. Another regular item on Joe Duffy!

So what to do. Well, my advice is usually very simple. Go guaranteed. A guaranteed policy by its very nature guarantees the premium from the start. You know exactly what you will pay for the full term of the policy. Protect what needs to be protected, namely your mortgage and debts and your ability to deliver income for your family. If your mortgage is due to finish in 15 years and your kids will be self-sufficient in 10 years then have two policies corresponding to each need. No sneaky price increases. And cash in the savings too before the life insurance premium eats it up!

Naturally everyone situation is different and needs to be assessed individually but please don’t wait until you get a letter through your door to fix this. Just get in touch if you think you have one of these policies. We have got clients out of similar situations before the price increases kicked in and it has saved them a fortune.

I hope this article was useful. If you have any questions or comments please feel to leave them in the reply box below and I’ll address them here on the blog.

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